Riding The Economic Roller-Coaster–The Big Plunge Is Just Up Ahead

In what at times has sounded like a script from Sesame Street, pundits and economists have endlessly engaged in speculating about whether the recession looks like the warm and fuzzy Letter U, the nasty Letter V, the even nastier Letter W, the crazy Letter X, or the dreaded Letter L. It’s enough to make you swear off Alphabet Soup forever.

Call me illiterate, but I think we’re barking up the wrong analogy, what we’ve got  looks more like a roller coaster from where I  sit. Think about it: the most terrifying ride in the park–you go up a little and then down, your heart lands in your stomach and you’re afraid you’re going to upchuck all over your date but then you realize that you survived and it isn’t so bad and hey you’re going up again. And then you get to the top of the next rise and see the very long and steep decline that lies ahead…

I’m no economist, but while the Cash for Clunkers program certainly helped lower car inventories and upped the average mpg of the cars on the road a tad, only 41% of the cars bought under the program were American and hey did you know that the payments are taxable? (Note–after a comment from an alert reader, see the clarification of what this means below.) Much more importantly, none of this does jack to reform our transportation policy.  So now that the program is over, how long does the economic honeymoon continue?  And when does an understanding of peak oil temper our Detroit at any cost mantra?

Then there is the money laundering bailout of the banks and insurance companies.  Stockholders got stuck in the hot water spin cycle where their money shrank the big one leading a panicked Congress to shovel enormous amounts of money at these companies with shockingly little oversight or regulation. We don’t even know how the money was used or where it all went.  And funny story, those companies that were about to plunge into the abyss and take us with them–stock prices are back up, and the CEO’s are doing quite nicely, thank you.  And what exactly has been done to insure that it doesn’t happen again?

As for the foreclosure crisis–that nasty little house of cards seems to have eased.  Or not.  Seems there are some mortgages called Option ARMs about 70% of which will reset before 2011, some by as much as 63% leaving a whole lot more people with not much of an option but to go into foreclosure, so  that one isn’t over yet either.

Those factors, and throw in the health care debacle and unemployment while we’re at it, are enough to say we’ve still got a problem but our current  economic woes  are only the tip of the not so proverbial iceberg.   Which happens to be melting. And quickly at that.

Our national self-centered myopia when it comes to climate change and environmental peril is blinding us to the inevitable, drastic changes ahead.  In the face of incontrovertible evidence to the contrary, we believe there is such a thing as clean coal and safe nuclear energy, we blithely use pesticides and herbicides on our land and then drink them from our rivers. We poison our air and imperil our food supply by genetically modifying it and then go back to watching Mad Men or American Idol without a minute of my bad or wondering about the consequences and cost of this folly.

And costly it will be.  As the healthcare ‘reform’ debate has made all  too clear, we have incorporated our democracy to the point where the welfare of huge corporations is considered at least if not more important than the welfare and health of the people they supposedly serve.  The same is even more true of the energy and global warming debate, witness the recent effort by the U.S. Chamber of Commerce to hold a “Scopes”-like trial on global warming for the simple reason that the corporations they represent will do just about anything to  keep making a buck for as long as they can, no matter the cost and heaven forbid they should be held accountable for the damage that is staring us in the face.

This head-in-the-sand state of national denial is not sustainable, it’s not even survivable and it most definitely is not profitable.  Richard Power puts it quite eloquently,

(T)he climate change debate (by that I mean what to do about it, not whether it is real), is not… simply one of dire national importance, it is one of dire planetary importance, and the nature of opposition to meaningful action on climate change is not simply self-abusive, it is suicidal.

Or in the even more dire words of Johann Hari, we are at “five minutes to ecological midnight.”

Whether or not the  recession is ending is irrelevant and not even the correct question.  At best, we are in a bit of economic remission, but do not be  deluded, the ride has only just begun, and the big fall is still ahead.

I’ll leave you with this…

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7 comments

  1. Carl says:

    “I’m no economist”

  2. Randy White says:

    So the gig is up, and the questions is, what do we do with all of those nuclear weapons? Gotta have unity on disarming the planet, but how to achieve that with so many different opinions? About the only thing that can kill us all so fast is nuclear war – besides that, we can pretty much work things out.

    In Portland, the 40-year climate action plan was recently released, but there is no way to implement it.

    Frankly, the feedback I receive from conversations among community organizers is that there isn’t enough bite to a 40-year plan, people think they can put off rapid adaptation until some future date.

    With the release of Bright Neighbor 3.0 this November, we have outlined a general 4-year plan (open to feedback!) that any person, group, or organization can adopt when they choose to finally get some dirt under their fingernails and really get into the game.

    Our new release is taking the Bright Neighbor system nation-wide, with the ability to track the successes, progress, and even failures for neighborhoods, streets, organizations, and business / government. We are incorporating metrics tools and measurements to quantify community efforts for status reports. These will be useful for tracking carbon measurements and other categories automatically generated with self-reported actions.

    One neighborhood or group will be able to track their progress towards relocalization as compared to other neighborhoods. These reports will be useful to show community progress towards the suggestions and guidance outlined in the 4-year Bright Neighbor plan.

    So there are plenty of people hard at work on things, no matter how dire the situation seems.

    Chin up Lucinda! There’s a lot to rally behind!

  3. Lucinda says:

    Randy, I agree that there are many things to rally behind and many wonderful local efforts to be proud of. But I am not optimistic about the long term economic picture, let alone the long term environmental scenario.

    Regarding economics, Robert Reich’s latest piece, http://robertreich.blogspot.com/2009/09/continuing-disaster-of-wall-street-one.html says the same thing regarding the banking industry in more detail,

    “Let’s be clear: The Street today is up to the same tricks it was playing before its near-death experience. Derivatives, derivatives of derivatives, fancy-dance trading schemes, high-risk bets. “Our model really never changed, we’ve said very consistently that our business model remained the same,” says Goldman Sach’s chief financial officer.

    The only difference now is that the Street’s biggest banks know for sure they’ll be bailed out by the federal government.”

    “The mega-bailout of Wall Street accomplished little. The only big winners have been top bank executives and traders, whose pay packages are once again in the stratosphere.”

    Yet without substantial reform, the nation and the world will almost certainly be plunged into the same crisis or worse at some point in the not-too-distant future.”

  4. Jerry Jauch says:

    While I generally agree that the economy is likely to suffer more setbacks and end up giving us a much lower standard of living, I must point out an error in the cash for clunkers part. The rebates go dorectly to dealers to lower the price and are not considered income or subject to income tax.

  5. Lucinda says:

    Jerry, yes yet no–according to Cars.gov which is the official website for the program there is not an income tax issue, however, there may be a sales tax liability:

    “Do I have to pay State or local sales tax on the amount of the CARS program credit?

    MAYBE. The question of whether a consumer must pay State or local sales tax on the amount of the CARS program credit depends on the sales tax law of each State or locality. Consumers should review the law of their respective States or consult a tax advisor to answer this question.”

  6. Lucinda says:

    And then there is this from The Guardian (UK) http://www.telegraph.co.uk/finance/financetopics/financialcrisis/6186535/Lehman-collapse-12-months-on-and-the-financial-system-isnt-fixed-warns-Stiglitz.html

    “Governments have failed to rein in the size of banks sufficiently 12 months after the collpase of Lehman Brothers triggered a meltdown, Nobel Prize winner Joseph Stiglitz has warned.

    Joseph Stiglitz warns banking problems are bigger than pre-Lehman
    Joseph Stiglitz warns banking problems are bigger than pre-Lehman

    Mr Stiglitz, who is former chief economist at the World Bank, told Bloomberg News that “in the US and many other countries, the too-big-to-fail banks have become even bigger.

    “The problems are worse than they were in 2007 before the crisis.””

  7. Kate in Bellingham says:

    Hey Randy- Bright Neighbor a great plan! Transition Towns too, all of us working towards resiliency and local self-reliance. Connect with like-minded people in your town or neighborhood and get started!